IBM Misses Q3 Revenue Estimates; Shares Drop 4%

Shares of International Business Machines Corporation (IBM) declined 4.3% in Wednesday’s extended trading session after the computer hardware company reported disappointing third-quarter revenues, which missed analysts’ expectations. However, earnings during the quarter beat consensus estimates.

The company reported revenues of $17.6 billion, missing analysts’ expectations of $17.77 billion. Adjusted earnings of $2.52 per share slipped 2.3% year-over-year. The Street had estimated the same to be $2.50 per share.

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Segment-wise, the company’s Cloud & Cognitive Software segment revenue was up 2.5% year-over-year, while the Global Business Services segment recorded 11.6% growth. Notably, the Global Technology Services, Systems, and Global Financing segments posted a decline of 4.8%, 11.9% and 19.2%, respectively, in revenues. (See IBM stock charts on TipRanks)

Looking ahead, the CEO of IBM, Arvind Krishna, commented, “With the separation of Kyndryl early next month, IBM takes the next step in our evolution as a platform-centric hybrid cloud and AI company. We continue to make progress in our software and consulting businesses, which represent our higher growth opportunities. With our increased focus and agility to better serve clients, we are confident in achieving our medium-term objectives of mid-single digit revenue growth and strong free cash flow generation.”

Recently, Credit Suisse analyst Matthew Cabral maintained a Buy rating on the stock and raised the price target to $176 (24.03% upside potential) from $167.

In a note to investors, Cabral said, at current levels, IBM’s prospects remain significantly underappreciated and undervalued in a hybrid-first world.

Consensus among analysts is a Strong Buy based on 4 Buys versus 1 Hold. The average IBM price target of $166.6 implies 17.4% upside potential to current levels. Shares have increased 23.3% over the past year.

TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on IBM, with 1.9% of investors maintaining portfolios on TipRanks increasing their exposure to IBM stock over the past 30 days.